The first time I encountered an MLM, I was about fourteen years old. An adult I trusted and adored had recently joined Amway, and told me, "My friend has an opening for an online job, and I recommended you. Are you free for a phone interview with him?" The idea of making money from home at 14 was incredibly alluring, as I couldn't drive yet and couldn't have a job to buy all the extras I wanted. I also felt so special and honored that this adult I respected thought I could handle this job and would recommend me. Imagine my confusion when, during the interview, the interviewer (who turned out to be the person who recruited the adult I trusted into Amway) started talking about "when you start your business." I had been under the impression that this was a job, mostly because I had been told directly that it was a job. However, if this woman who was important to me wanted me to do it, I was game to give it a shot, even if it wasn't exactly what I'd expected.
But when I told my parents about the call and that I wanted to do it, they were furious and told me in no uncertain terms to take no calls from the Amway guy, and to not send Amway any of my babysitting money for a "starter kit". They educated me about multi-level marketing schemes (MLM) and explained the problems with the structure. I'm not sure whether they said anything to the person who had connected me with Amway, but I do know that I never trusted her in the same way again. It was a strange and bittersweet lesson to learn at such a young age. Until that point, I always believed that adults had my best interests in mind. Although I still love and forgive the person who "recommended me for the job" I can't feel the same way about her after she deceived me like that, even though I know she was deceived herself.
That was not my last experience with MLM's. Two others attempted to recruit me before I was even eighteen years old. As a homeschooler, I was a magnet for them, as homeschooled teenagers have a reputation for being intelligent, but completely naive about the way the world works. I can't even count the number of my high school peers who joined MLM's, always temporarily. And as of now, I've lost track of the exact number of MLM's that have tried to recruit me personally.
About a year ago, a homeschool mom approached my younger teenage sister at a speech and debate tournament and told her, "Honey, your acne is very distracting! I have an essential oil for that. Here is my price list!" That was when I declared personal war on these revolting, macabre scams that pass for entrepreneurship in this society. Before that, MLM's meant no more to me than a hurtful experience at the age of fourteen and semi-regular annoying messages from Facebook friends, but after that, I wanted MLM's wiped off the face of the earth.
But maybe you are tempted to dismiss me at this point. Maybe I'm just jaded and have had all the worst luck with MLM's. Surely the smiling woman selling makeup on your Instagram can't really be doing anything all that bad. But the statistics and research paint an equally grim picture of just what MLM participation looks like, and that is what this article is about.
Sometimes, when I am contacted by MLM participants and I tell them I do not support MLM's, they feign confusion and say, "Hun, this is a valid business! What is an MLM anyway?" It's a reasonable question, even when it's asked by a person who's being transparently fake and disingenuous. An MLM, or multi-level marketing scheme, is a business that makes a product, and then uses independent contractors to sell the product to their personal network of friends and family. For this reason, it is sometimes called network marketing or direct selling. The key feature of the MLM that sets it apart from other business structures is that when these independent contractors (who may be called coaches, distributors, independent stylists, independent fashion consultants, etc. depending on the MLM) recruit friends and family to sell also, they get a percentage of the revenue generated by the recruits, either through selling products or recruiting still more people. Some popular examples are Amway, Beach Body, ItWorks, LuLaRoe, Mary Kay, Tupperware, Young Living, doTerra, and Arbonne. The most complete list of known MLM's that I am aware of can be found here.
Unfortunately, when it comes to shady tactics, my experiences are not anomalous. Some MLM's tell big lies, and others tell lies of the more pernicious, sneaky variety, but without exception, they all tell lies. I have collected eight of the most common, and hopefully, we can set the record straight here. In the past several months, I have made a hobby of researching this issue, and I know that my word choices in this article are uncharacteristically vicious of my normally sweet and wholesome articles, but trust me when I say that I have researched MLM's more than most people ever will and I am a thousand percent sure they deserve the strongest words in my vocabulary. I have linked sources, statistics, and evidence where applicable.
If you are in an MLM, I implore you to continue reading. I know very well that what I am saying would be dismissed by your upline as "negative" and "hateful". Most MLM participants dismiss people like me as haters who are just unhappy with themselves and have nothing better to do than tear down other women. That is NOT the place I'm coming from. I am coming from a place of deep concern for you, that you're being taken advantage of.
If you're determined to believe your upline because believing me would mean giving up on the lifestyle you're working towards and have been all but promised will be yours, I can't help you. I see so many of you on social media giving this your all, and it enrages me to know that many of you are being told you aren't making money because you aren't working hard enough, aren't buying enough product, aren't good enough in general. If there's any part of you that wonders if maybe the problem isn't you, please give me five minutes and follow the links I've included.
1. "It's not an MLM!"
I was lied to in this particular fashion by a consultant only recently. I asked her whether she made money from her downline's (i.e., the people she recruited) sales, and she said that all the money goes into a "pool" of money. When I asked whether her share of that "pool of money" is bigger when her downline has more people and they sell more, she changed the subject. If they say that it is not an MLM, there are excellent reasons to believe it is an MLM. Some terms they may prefer are "network marketing" or "direct marketing" or "direct selling"; it is all the same thing.
2. "Pyramid schemes are illegal."
This statement is true only in the most technical, legal sense possible, and is furthermore completely misleading because it's so irrelevant to the topic at hand. A pyramid scheme is any setup where participants cannot make money without recruiting people. An MLM is technically not a pyramid scheme because there is always a product, so theoretically it is possible for participants to make money through selling product without recruiting people. All of the MLM's I keep tabs on publicly post the names and incomes of their most successful consultants, and I have searched in vain to find even one of these people who has not recruited anyone. So while MLM's satisfy the technical legal requirement of "theoretically possible to make money without recruiting" in practice, they are pyramid schemes.
3. "You can make money working from home!"
Why are pyramid schemes illegal? It's because every participant except a fraction of a percentage at the tippety-top of the pyramid lose money. They have this in common with MLM's, since according to the FTC, 99% of people in MLMs lose money. One researcher estimates that MLM participants pay up to $25,000 to participate when expenses, like traveling to conventions and buying the company's training resources, are included. Even when participants don't buy everything their upline asks them to, he estimates they spend around $1,000 per year that they are in the MLM on expenses besides products to sell.
In his words, "In every case, using the analytical framework described, the loss rate for all these MLMs ranged from 99.05% to 99.99%, with an average of 99.71% of participants losing money in an MLM. On average, one in 545 is likely to have profited after subtracting expenses and 997 out of 1,000 individuals involved with an MLM lose money (not including time invested)."
A separate survey found that not only were a majority of MLM participants earning less than $0.70 per hour before expenses, 22% voluntarily admitted to lying about their earnings. Mind you, that's only the ones who weren't lying about that too!
Part of my distaste for MLM's comes from the fact that they prey on the desire of young mothers to stay home with their children. Our economy has made it incredibly difficult for families to get by on one income and thus to satisfy this innate biological desire, and I overflow with rage that evil profiteers would exploit a desire so pure and good. Fortunately, there exist legitimate work-from-home jobs that don't cost money.
4. "Don't listen to the FTC. Everyone on my team is making money!"
How much money is everybody spending? People in MLM's frequently share photos of their income statements that don't show how much they spent on the product. Selling product is not the same thing as making money. You're only making money if your revenue exceeds your expenses, and the expense part of their income statement never seems to make it onto social media. One study even found that the top 1% at Amway at one point were earning an average of $12,500 per year, but they were LOSING $900 per year on average. You know they didn't tell potential recruits that.
5. "You can have friendships and community through this company!"
Here we see most clearly just what kind of ghoulish behavior these shameless racketeers are capable of. They employ cult-like tactics and love bombing to prey on lonely stay-at-home moms, people with disabilities, and other vulnerable people who have difficulty finding community. Many people join because they're lonely and they think their upline genuinely likes them, and they desire to be part of the smiling groups of women they post on social media. While I don't doubt that occasionally, lasting and genuine friendships are made, that's not the usual state of affairs. You can tell whether a friendship is real or not based on how they respond when you do something they don't like, for example, leaving the MLM. MLM "friendships" quickly turn sour when participants leave. This article, this personal story, this horror story, and this analysis discuss this topic further.
Worse than that, MLM's are detrimental to whatever existing friendships participants had before. It's hard to be friends with someone who's always trying to sell you something. MLM's also teach their participants how to use manipulation and deception to set up meetings with friends who wouldn't be interested if they knew what the meeting was going to be about.
6. "It's not a scam, because you can advance higher than your upline and go as high as you want!"
Think about this mathematically. Suppose you start an MLM, and recruit five friends, and have them each recruit five friends. You wouldn't make it to your thirteenth iteration before you exhausted the world's population. If you're in an MLM, do me a favor and count up how many levels there are between you and the CEO. If there are 10 or more, I hope you can see now that we're done here and any decision besides quitting immediately is irrational.
The reason you're not making money is not that "you aren't working your biz hard enough"; it's that it's mathematically impossible for you to do so. Consider also, most people want nothing to do with multi-level marketing schemes (check your outgoing messages if you don't believe me) and of the ones who do, only some percentage will be in the demographic to whom your MLM appeals. The people at the top of your MLM have already recruited all the people who are likely to be recruited. You may advance to the same level as your upline, but you will find it exponentially harder to advance again.
Suppose I started a Lularoe "business" today. I would never, ever, ever in a million years make Mentor no matter how hard I worked, not because I was lazy but because the pyramid is too tall. We could sit around and speculate about just what kind of depraved villainy inspires these fiends to imply that their downlines are lazy, when in fact they're working their fingers to the bone against the laws of mathematics, but it would make me nauseous, so let's just move on.
7. "All companies are MLM's!"
MLM's say this because a regular, ethically structured corporation has a CEO at the top, and then perhaps the CFO, COO, and CIO underneath him or her, and then a few VP'S, and then middle management, and then the employees, and the whole thing makes a pyramid structure of multiple levels. This is a particularly obnoxious thing to say, partially because it's so easy to see why it's fallacious. Obviously, Target isn't trying to hire as many people as they possibly can. Why? BECAUSE TARGET PAYS THEIR EMPLOYEES. If they were going to pay their employees and still hire as many as they possibly could, they would go out of business. The only way anyone could possibly survive while recruiting as many people as possible is if they weren't paying them. Real companies are not MLM's because their employees take home a guaranteed paycheck.
8. "You can own your own business!"
I'll never forget being 17 and trying to awkwardly explain to a Mary Kay consultant that when I said I wanted to be an entrepreneur, shilling overpriced makeup to line her pockets was not what I had in mind. While specific rules differ from MLM to MLM, all of them impose rules on their consultants that a real small business owner wouldn't have to deal with.
Some of them require consultants to place at least one order in some time period to maintain active status, but that literally makes it impossible to exercise any business savvy whatsoever. If you can't calculate your projected demand and order accordingly, not only are you not being allowed to be a business owner, but you're just begging to lose money. Others require a minimum size order, which has the same problem.
Almost all of them set the prices on products themselves and don't allow consultants to discount products under any circumstances, which from a business perspective is so horrifying I don't even want to think analytically about it. The supply and demand charts with these constraints would be high-octane nightmare fuel. If you are in an MLM, not only are you not a business owner, you're literally the customer.
If you are in an MLM, know this: I wrote this because I care about you. If I did not care, I wouldn't have spent my entire evening trying to warn you. I know that speaking against MLM's is seen as not supporting women, but I wrote this because I think it would be unsupportive of women not to speak out against their exploitation (74% of MLM participants are women). If you are going out of business, I can help you cut your losses by looking at your inventory and seeing what I can buy from you wholesale. I wear a lot of Lularoe and makeup, I diffuse a lot of essential oils, and I am passionate about helping women get their lives back! I will partner with you in this, and I will still love you and be your friend even if you choose to stay in your MLM. But I will always take every opportunity to tell you to leave because I am 100% sure it is the best and most loving thing I can do for you.
If you are thinking about joining an MLM, I urge you on the strongest terms to run far away. I know they're waving lavish vacations and lifestyles in your face, promising you it can all be yours, and I know that can be alluring, especially if your life is hard right now. But an MLM is not the answer. Believe facts and statistics. Save your money. If you like the product so much, buy it at wholesale from consultants going out of business. Consider a different sort of side hustle, like starting a photography business, selling crafts on Etsy, or driving for Uber.
If you have people in your life who are involved with MLM's, it is important not to pity-buy products from them. It is not loving. You're not supporting anything except their false hope that this MLM can make them rich. The sooner they leave, the better off they'll be. If you genuinely like any MLM products, you can help in two ways by buying from going-out-of-business (GOOB) consultants: first, it actively undermines the MLM by devaluing the brand; and second, you are helping the poor MLM victim recoup some of their investment that they certainly made with the best of intentions and that was cruelly exploited. The MLM already made its profit, so by buying GOOB, you are not causing any further harm or lining their pockets anymore.
Finally, when they do leave their MLM, forgive them unconditionally and support them in their recovery. Remember that they were a victim, even if they hurt other people in the process. There are fantastic communities that exist to help people get their lives back after MLM's. And if they try to affiliate with another MLM, do what you can to stop them. Friends don't let friends MLM.